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Question DetailsAsked on 8/20/2016

The insured received a check from the insurance company and will not pay the contractor for the work done

I started a job and have a signed contract for a kitchen repair at $ 5000.00. The client called the insurance company and the adjuster told me that he would pay my invoice. I sent him the invoice including the additional work for $ 8405.00. Th client is refusing to pay my invoice and want a financial gain from their claim. Are they breaking the law?

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1 Answer


First, you need to find out WHO is supposed to pay you according to the contract and the insurance policy - the client or the insurance company. Obviously, for additional work beyond the claim or enhancements or such the client is who should be paying you.

1) some insurance companies (sometimes depending on $ amount) pay direct to the client, who is supposed to pay the contractor

2) some write the check requiring both parties endorse it to be able to cash/deposit it. Usually done with the client endorsing it and handing it to the contractor to sign and then deposit in his account while both are at the contractor's bank so the bank can verify the identity of both parties; and on the handover the contractor provides a paid in full annotated invoice or receipt and applicable lien releases. This can get messy in a bank, so is commonly done through an escrow company.

3) some pay to the mortage company as escrow agent to then pay to the contractor when client certifies the job is done and the mortgage company is happy with the results and the contractor has provided receipt and lien releases - done this way at times because many mortgages require application of insurance payments to the repairs (as opposed to into the insured's pocket) to protect the mortgage value in the house, and the mortgage holder is usually an additional insured on the policy


I would contact the adjuster and tell him the work is done and ask how much they paid to the client for the work (if any), and explain the client is not paying you. They will get on his case, because in most cases that is insurance fraud - unless they negotiated a cash settlement and foolishly did not require that the repairs be proven to actually be done.

The other possibility is confusion - it may be the adjuster is ready to issue a $5000 check to you (the allowed claim amount) but you sent a bill for $8405 or $13405 - the whole job bill. If they passed it on to the client, the client expected to see a bill for the extra work only - $3405 or $8405 as applicable but saw one for the total amount INCLUDING the $5000 insured amount. If that is the case, you need to talk to the adjuster about exactly how/who to bill this to - maybe $5000 to insurance company for themm to pay the claim amount, thenn the rest to the homeowner for the excess work.

As for the $ - sounds like $5000 for the damages, plus $3405 or $8405 (amount not clear from your comment as to whether the $8405 was invoiced total or the additional amount) for additional work not directly related to the claim - improvements or enhancements or upgrades or ancillary work conveniently done at same time but maybe not even in same area as the damage. Hopefully you had a written agreement on the "additional" amount in the contract, and did not just overrun the estimate without approval.


On breaking the law:

If the client intended to never pay you the agreed upon amounts, then that would be fraud - criminal and/or civil depending on the specifics. If one could not prove fraud (hard to do), then he just owes you the money (to the extent agreed to in the contract or the amount that a court holds to be reasonable in a lawsuit or lien hearing) like on any other contract.

The insurance company might stop payment (if they paid client and the $5000 check has not been cashed) and reissue it to you. Otherwise, you have the normal contractor recourses - small claims court depending on $ limit in your state, sue in regular civil court (pretty pricey to do that for $5000, but might well be worth it - especially if total is $8405 or $13405), or file a lien on the property and hope to get it back either when the house is ultimately sold (with or without reasonable interest depending on state) or file the lien and then take action to "enforce it" - foreclose on the home to recover your money from the sale.

Generally, you can recover your amount due and reasonable legal costs - in some states double or triple the amount due with or without legal costs if the court holds the person unreasonably withheld payment. I think I read somewhere a few years ago that a federal court held that total recovery (by the contractor) of the sale amount (minus outstanding prior liens and mortgages in some but not all states) has been ruled illegal - you can recover what the law (including any applicable double or triple damages approved by a court in a suit) allows but any remaining equity goes to the owner after the sale, so don't expect a windfall. Generally you are darned lucky to get even half recovery in a lien action - one reason you have Payments Default (or similar sounding) coverage under your contractor's insurance.

Obviously, your best resource for hashing this out if a simple split billing to insurance company and client as outlined above does not settle it, would be an Attorney (not an Angies List Search the List category) with expertise in construction contracts, insurance claims, and builders/contractor's liens.

Answered 4 years ago by LCD

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